Catalonians vow to leave Spain

As I have continued to talk about over this year, without a massive change in direction, the economic outcomes of Europe have already been decided. Attempts at supra-Eurozone fiscal consolidation all but guarantee a fall in economic output for the EZ, and the recession has really only just begun. In that regard it is the politics that will become increasingly important over the next 12 months as the economic fallout opens new fractures in the political systems of participating nations.

With over 23% unemployment and a continuously worsening economy, Spain, along with Greece and Italy, is certainly somewhere I have been watching, and I have commented more than once that I suspect Mariano Rajoy political career is going to be short lived. What has become apparent over last week is that the failing economy has once again stirred up the nationalist desires within the Spanish regions as resentment against the national government’s failure to fix the economy has risen.

Catalonia, the home of Barcelona and a traditionally prosperous region, has seen its wealth fall rapidly over the last few years while its annual deficit had grown 8% of GDP, in part, due to transfers to the Spanish state. The mediteranian coast has been hit excessively hard by the economic downturn with the latest Tinsa housing index report showing that the regions residential real estate prices have now fallen on average by nearly 40% from peak.

With regards to the cumulative falls by segment since the top of the market, the “Mediterranean Coast” is once again the biggest faller, with a decline of 39.5%; followed by “Capitals and Major Cities” with 35.6%, “Metropolitan Areas” with 31.4%, the “Balearic and Canary Islands” with 30.2% and “Other Municipalities”, which refers to those not included in other categories, with 27.4%.

The tension between the Spanish state and Catalonia is not new, in fact the inaugural September 11th national day commemorates when King Philip V banned the use of the Catalan language after winning against the Catalan army in 1714. You can also read about the Statute of autonomy to get an idea of the recent history. And the economic fallout of the Eurozone crisis has again pushed the issue to the fore. This week an estimated 1.5 million joined the Sept 11th separatist march and took to the streets in Barcelona to demonstrate for independence, as RT News reports:

And yesterday the Catalan regional leader, Artur Mas, warned both the Spanish state and the EU to prepare for Catalonia to become independent:

The European Union must prepare itself for the breakup of countries within its frontiers, the regional prime minister of Catalonia warned on Thursday, adding that Madrid could not simply ignore a huge independence demonstration held in Barcelona this week.

Artur Mas said: “Europe will at some time have to think about this. It wouldn’t make sense if, because of some rigid norms, it was unable to adapt to changing realities.”

His comments came after the European commission president, José Manuel Barroso, indicated this week that any new state would have to apply to join the EU.

Mas said there would be no looking back for Catalonia after the march, which police said was attended by 1.5 million people – a fifth of the population of the north-eastern region. He also warned the Spanish prime minister, Mariano Rajoy, and his conservative People’s party (PP) government that they would be foolish to try to ignore the apparent desire for greater autonomy.

Comments

There is a lot in this. I was in Spain in March this year (interviewing economists) and many people I spoke with said that this was a risk in Spain (in particular).

The question however becomes one of could an independent Catalonia be viable (or sold to its people as being viable) outside the EU. Because that is almost certainly what would have to be sold. It couldnt depart Spain and stay inside the EU and hope for a better deal.

Just so everyone has an idea, the Catalonia economy is roughly the same size as Portugal (about 20% of Spains GDP is attributable to it). It exports a lot of stuff as well, and obviously has a large tourist scene.

I doubt that ‘lets go it alone’ impulse is going to get up. I thought that with Eire (where a traditionally very dry government made the [in some respects crazy] decision to stand by the banks) there was a case for maybe the people thinking, ‘bugger this lets go it alone’ (outside EU) and being fairly confident it was a viable option. But it has never had a real look in there.

In Spain (and Catalonia) EU funds have provided a lot of quite overt on the ground benefits (there are signs up everywhere saying X project is funded by the EU), so I doubt (despite the horrific unemployment) they will go that far.

That said it is a question that has to be asked, and something one assumes the EU would have to have a policy for.

The other thing I would note is everyone should be very careful using RT news. They have a problem with coherence and facts on a lot of occasions. They also like talking up seperatism in places other than Russia (to keep the focus off seperatism in Russia)

And last night Rajoy saying Spain might not need a bailout; what’s he smoking. I was amazed working there to see the EU projects signs all over and asking where is the EU getting this money from. Even as an outside I was made aware of the tensions in Spain, and never understood really what is was all about. Spain is a great country and it’s a shame what’s happening.

I think the long term trend is greater “cantonisation” of sovereign nation’s breaking up – which in the end is a good thing. Decentralising government and bringing it back to local/regional areas fosters better co-operation, efficiency, and competition.

The process of Balkanisation is a very interesting one and offers one route to restructuring Europe. That is, the dismantling of national governments, the strengthening of regional governments and a truly functional/legitimate pan-European government.

A similar outcome may also be worthwhile for Australia, dismantle state government and amalgamate local governments to create “super” local government – cutting out an entire layer of public administration!

I used to work with some guys from catalonia. They were hardcore. They told me that their language is one of the oldest on the planet. They said there there will always be the desire to be independant. They did not like to be refered to as Espanol. They were Catalan and proud. They do not care about any economic consequences, they just want independence at any cost. If this escalates, there is a very real chance of catalans going back to terrorism. However, the Catalans will call it freedom fighting.

I was told the same, but could not understand why they couldn’t get on. I ended up seeing it as a Northern Ireland situation. My experience there made me more cautious of the Basque guys. We were always more cautious in Basque country, but I never saw anything.

I dont really know too much about it, but if the Catalans get violent then the Basque seperatists will probably seize their opprtunity to gang-up with Catalan separatists against the rest of Spain. It was way these guys spoke with such intensity that set off alarm bells with me.

The Basque conflict has been simmering for as long as I can remember with ETA declaring cease fire only 8 years ago (http://news.bbc.co.uk/2/hi/europe/3499477.stm). It is THE reason why FC Barcelona is more than just a football club. I’m not sure whether this is an imminent threat but I do agree that economic downturn always fuels these sort of tendencies. There are many regions in Europe with a minority advocating separatism. Yesterday there was a separatist attack in French Corsica.and even the province of Friesland in The Netherlands is home to people who are overly fond of their home!

It is one of the reasons why the EU also has some comprehensive programs focusing on regions rather than nation states. An example is Interreg strand C (http://www.interreg4c.eu/3c_about.html) which promotes cross-border co-operation between regions.

Even if you got your groups wrong, your point about seperatist desires being inflamed by chronic high unemployment etc, remains valid.

I don’t know much about the Basques, but it wasn’t that long ago they were setting bombs off, and one of my first thoughts when hearing about the 20%+ unemployment rates in Spain, is that is the sort of thing that could be stirred back up again. The potential for violence across Europe is of genuine concern, as having up to 50% of your young men sitting around idle, shut out of prosperity, is not a good idea.

The Basques are a fiercely independent people. Their own language , quisine, customs etc. A gorgeous part of the world too.

“Let’s go it alone, how much worse could it get?” will come to be a popular and logical argument. Then will come the pay-offs for staying “in”. The world will print money until that option manifestly fails. This is one slippery slope we are on.

Let’s not forget that if an independent Catalonia has to apply to (re)join the EU it would have to sign up to (re)joining the Euro, which of course is the underlying reason for all these economic problems in the first place. So unless it can “fail” the convergence criteria and stay out, it’ll be subjected to exactly the same economic vandalism as the country as a whole is currently experiencing.

As far as I know, Catalonia is economic a powerhouse but they also have a high amount of debt. Leaving Spain would let the new Catalanian currency go through the roof crush their exports. To whom are they going to export to when the rest of Spain is sinking into poverty ?

What Catalonia could do is secede and say “stuff you” to the EU, print their own currency, and “be friendly to off-shore corporations”. Oh, and create their own CB backed by au/ag, and their own SWF. As for protecting themselves, go the “Swiss Way”.

The public debt problem in Spain is mostly at the regional level (Comunidades Autónomas, CM). The bureacratic fat built in these small kingdoms is mind boggling and it has kept growing throughout the post GFC period with little or no oversight. Before they could tap the markets but now that they are shut out they need to be bailed. Cataluña, which holds the top spot in debt (28,7% of all the CMs debt) needs a loan of 5 billion euros to patch up its maturing debt for 2012 alone (altogether around 13 billion out of a hole of 42 billion). This loan comes with strings attached, in particular rebalancing down to 0,7% anual deficit by the end of 2013. Is it wrong to ask them to tighten their belt? As for the suggetion of going Swiss, keep in mind that its biggest trade partners and debt holders (Spain and France) account for over 60% of their “exports”, I seriously doubt they would be happy to continue trading with them, in particular since their exports are not irreplaceable. The Swiss have worked for centuries to reach their current status. A more likely outcome for Catalonia would be another Baltic state.